The Japanese Yen (JPY) regained positive momentum on Wednesday following a brief dip the previous day, as trade-related uncertainties and safe-haven demand continue to drive support for the currency. Additionally, a robust rebound in Japan’s core machinery orders in February, along with growing expectations that the Bank of Japan (BoJ) will continue tightening its monetary policy in 2025, have further bolstered the Yen.
Safe-Haven Demand Boosts JPY Amid Trade Tensions
The Yen has been benefiting from ongoing uncertainty surrounding US President Donald Trump’s fluctuating stance on trade tariffs, which has prompted a flight to safety. Over the weekend, the Trump administration granted exclusions from tariffs on key technology imports, including smartphones and computers, primarily from China. Additionally, Trump expressed interest in granting exemptions for the automotive sector from the 25% tariffs already imposed. However, he also threatened to impose tariffs on other sectors like semiconductors and pharmaceuticals, which kept global trade risks elevated.
This trade turbulence, along with the growing belief that the BoJ will continue to raise interest rates in 2025, has supported the JPY’s ascent. As a result, the USD/JPY pair remains close to the multi-month low it reached last week, as the US Dollar languishes near its weakest levels amid worries about the Trump administration’s trade policies stalling US economic growth.
Japan’s Core Machinery Orders Surge
Data released Wednesday showed that Japan’s core machinery orders surged 4.3% in February, surpassing market expectations and marking the highest level in a year. The data revealed a robust recovery from January’s 3.5% decline, with manufacturing orders increasing by 3% and non-manufacturing orders rising by 11.4%. This signals improving business sentiment in Japan, which could translate into increased capital investment and higher employment, potentially boosting demand-driven inflation. These factors support expectations of a BoJ rate hike in the first half of 2025.
US Dollar Under Pressure Amid Fed Easing Bets
In contrast, the US Dollar is under pressure as concerns over the US economy continue to weigh on investor sentiment. The recent sell-off in US Treasuries reflects waning confidence in the US economic outlook, which has contributed to declining demand for the Greenback. Additionally, traders are increasingly betting that the Federal Reserve will resume rate cuts in June, with the possibility of reducing the policy rate by 100 basis points by the end of the year.
As a result, Fed Chair Jerome Powell’s speech later Wednesday will be closely watched for hints about the future trajectory of US interest rates. This, coupled with US Retail Sales data due for release, could provide further insight into the US economic outlook and impact the USD/JPY pair.
Technical Outlook: USD/JPY Remains Bearish
From a technical perspective, the USD/JPY pair continues to face downward pressure, with the failure to attract significant buying suggesting that the multi-month downtrend is far from over. Daily oscillators are deep in negative territory, reinforcing the bearish outlook. The pair is likely to find support near the 142.25-142.20 region, ahead of the 142.00 level, which marks the multi-month low touched last week. A decisive break below 142.00 could trigger further downside movement.
On the other hand, any attempt to recover above 143.00 will likely face resistance at the overnight swing high around 143.60. A sustained move above this level could open the door for a short-covering rally, potentially lifting the USD/JPY pair toward the 144.00 figure, with further gains targeting 144.45-144.50 and the psychological 145.00 mark.
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